Outlook good for lines of biz

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Risk factors

Although forecasters generally expect the lines of business to survive, particularly those that provide shared-services centers to meet agency needs, there are some cautions. In a report released in June, Input warns about these factors.

Some shared-services centers havent reached the critical mass needed to ensure continued expansion.

The Office of Budget and Managements 10-year implementation time frame depends on continued political commitment.

Agencies are reluctant to shut down older systems, reducing the potential cost savings from the migration to shared-services centers. OMB prescribes that agencies migrate only a minimum number of services, increasing the chances that agencies wont retire older applications anytime soon.

The decision to migrate to private-sector shared-services systems requires an A-76 competition, which gives agencies a chance to keep the functions in-house.

 Michael Hardy

The lines of business program is one of the Bush administration’s more successful behind-the-scenes initiatives, many observers say. But that won’t necessarily save it from the next administration’s chopping block. New presidents like to put their own stamp on government, and sometimes even successful examples of the previous administration’s work are cast aside.

However, those familiar with it say at least some of the LOBs are almost certainly safe. They span such a wide range that no one can predict their fate taken as a whole, but the successful ones will undoubtedly persist, though possibly with some modifications.

Market research firm Input, in a report released in early June, said the concepts behind most of the LOBs are likely to survive the administration change, although they might not retain their current form. The Office of Management and Budget has downsized many of them, leaving them with information-sharing goals that are more realistic and achievable, according to Input.

“The general consensus across most of government is that although progress has been mixed, OMB’s implementation of LOBs provides a long-term foundation for improving cost-effectiveness, information sharing and efficiency across government,” Input researchers wrote.

“The next administration is going to want to continue successful projects and retool or maybe completely dismantle less-than-successful projects,” said Tim Young, OMB’s deputy administrator of e-government and information technology. “When it comes to the lines of business, I think by and large they endure. They’re politically agnostic. It’s not a Republican or Democrat, conservative or liberal approach. It’s just good government.”

Input divided the initiatives into three groups. First, some LOBs, such as the Financial Management and Human Resources ones, are likely to survive because they create shared-services providers that give agencies access to common services without staffing and funding their own operations.

The second category, which also received a good prognosis from Input, includes LOBs such as Grants Management and Information Security, which have created communities that share advice and best practices. Although they don’t pool the workload as in the shared-services provider model, they facilitate much broader information sharing and insight than was previously possible.

The third group, however, might be at risk, according to Input. That includes the Federal Health Architecture and Geospatial LOBs. Input analysts said they might survive but remain small and limited because they are useful to fairly small constituencies.

However, size doesn’t equate to success, said John Sindelar, client industry executive at EDS. “I think the progress they’ve made is more determinate. Each of the lines of business is different so they need to be taken on their merits rather than painted with the same brush.”

Sindelar was a General Services Administration official until his retirement in February 2007. While serving as deputy administrator of the agency’s policy office, he played a major role in the LOBs’ early development.

Drawing on that perspective, he said Input might be mistaken in considering the size of an LOB’s constituent base in predicting its value to the next administration. Even dollar estimates of cost savings provide an unreliable measure, he said.

For example, the Case Management Line of Business, another one Input identified as having a limited constituency, has made a significant difference in how the Justice Department does its work, Sindelar said.

“Trucks used to back up to their offices to deliver information that was needed,” he said. “Moving Case Management forward is important to the Department of Justice.”

Young agreed, saying tha t managers of the smaller LOBs need to find ways to articulate the value of those programs.

“With Human Resources and Financial Management, it’s fairly easy,” he said. “We’re spending upwards of $800 million in development of new financial systems in a year.”

“With HR, it’s slightly south of $500 million a year,” Young added. “We have an understanding of how much we’re spending annually on something we can do more efficiently. With something like Geospatial, it’s challenging for any given agency to identify how they’re currently managing geospatial data.”

Agencies are at various stages in moving their HR and financial management functions to the shared-services centers, but momentum is growing, he said.

“We expect agencies will begin the process to select shared-services centers and that we will be monitoring migrations to assure that they are on schedule, within budget and have no unresolved issues or risks,” said Reginald Brown, director of modernization at the Office of Personnel Management, which manages the HR LOB.

“We intend to begin developing a mechanism to evaluate the capabilities of the shared-services centers,” Brown said. OPM is also planning an open season to select additional private-sector shared-services centers, and it will continue a benchmarking project to measure the effectiveness of the centers, he added.

Sindelar said the initiative has grown past its roots. It started in 2005 as an effort to help agencies comply with the Federal Information Security Management Act, he said.

“I think it’s gone beyond that now,” he said. “It’s essentially a vehicle by which agencies and OMB can drive policy. It gets incorporated and integrated into doing business across government.”

Richard Colven, vice president of industry analysis at Input, said the LOBs are not a partisan effort, which adds to their chances of surviving no matter which candidate takes the White House next.

The efforts that have developed in communities of interest rather than shared-services providers will probably stay that way, he added.

The smaller projects will also likely continue but might not gather any additional momentum, he said. They are inexpensive and highly valuable to their constituencies even if the constituencies are small.

“I think if they fade away, it’ll be [because of] lack of interest from the agencies sponsoring them,” Colven said. “Unless someone says, ‘We don’t see any value in this,’ I don’t know why they would be on anybody’s target list.”

LOBs that survive will do so because they’re successful, not because of widespread public support. Most of the public knows and cares little about the government’s inner workings, he said.

“There’s an argument that it’s hard to undo what’s been done by OMB,” Colven said. “OMB has been put forth as the taxpayers’ watchdog. However, some of the things they do are so esoteric…, if they were to go away I don’t think most citizens would miss” them.

However, those inside government understand, and they see the LOBs moving forward and gaining momentum, he said. “Once you have a shared-services center up and running that multiple customers are using, that’s hard to undo,” he said. “In theory, the agencies that have migrated to the shared-services center have turned off their old systems. Going back would take a lot of time and money.”

Colven said it does not really matter which candidate wins the election, at least not from the standpoint of maintaining the LOBs and other elements of the President’s Management Agenda that Bush created.

“The difference between either of the major candidates and Bush is much bigger than the difference between the major candidates,” he said. Bush came to the White House with a business background that neither the Republicans’ presumptive nominee, John McCain, nor Democrats’ Barack Obama can claim.“I think [Bush] wanted his legacy to be, ‘I made government run more like a business,’ and events overtook him,” Colven said. Neither McCain nor Obama is likely to make management as high a priority, he added.

Young said early successes with other Bush administration initiatives, predating the LOBs in some cases, set the stage for their success. For example, E-Payroll, one of the projects created by the E-Government Act of 2002, yielded a 30 percent decrease in payroll-processing costs governmentwide.

Rather than losing the money they save through reduced appropriations, agencies can redirect it to their core missions, he said.

“There are many arguments against a unified, one-government approach, but I think those are narrow-minded and time-bound,” he said. “Arguments like: ‘We’re unique,’ ‘We’ve never done business that way’ or ‘We can’t trust the private sector to do business for us.’ Those same arguments will come to light [as the new administration takes office], possibly in a very vocal manner. But those arguments are answerable.”